RBC Capital Markets Says Gold Correction Doldrums Ahead

Source:

"We believe investors should take profits ahead of the end of a Fed rate cutting cycle and ahead of the seasonally quiet period for gold and gold equities in June, July and early August," RBC Capital Markets analyst Michael Curran wrote.

RBC Capital Markets Tuesday urged investors to crystallize profits now and "take advantage of gold at lower levels within the June-July period."

In his analysis, Michael Curran noted, that over the past 28 years, gold has typically outperformed during the months of April and May, usually followed by a seasonal slowdown in the summer months, "and an upsurge in the early fall."

"We believe investors should take profits ahead of the end of a Fed rate cutting cycle and ahead of the seasonally quiet period for gold and gold equities in June, July and early August," Curran wrote. "Since the broader market began to react to the uncertainty over the US subprime mortgage crisis on August 14th, and the sell-off of all financial securities began, we believe that gold has discounted in the uncertainty in financial markets and the implied inflation expectation associated with rising commodity prices. We think recent news of possible IMF gold sales up to 400 tonnes are priced in at current levels, and would have limited impact on the market."

"On the back of this rationale, we advise clients to sell into the typically strong April-May timeframe, ahead of the seasonal slowdown usually observed in the early summer months," he said.

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